Making Tax Digital for VAT and Digital Record Keeping
Making Tax Digital for VAT is now in effect for most VAT-registered businesses. Part of the new regime is a requirement to keep and store digital records.
What are digital records?
In essence, the records you should keep for Making Tax Digital for VAT purposes are the same as those you would have kept as a VAT-registered business before Making Tax Digital, except some of those records, should be kept digitally.
Examples of digital records include “designatory data” which includes the name of your business, its address, the business’ VAT registration number, and the details of any VAT accounting schemes that are used.
Other examples of digital records that should be kept include records about the supplies that your business makes and receives:
- Digital records relating to supplies made include the time and net value of the supply, and the VAT rate charged.
- Digital records relating to supplies received include the time and value of the supply (including any VAT the business can’t claim) and the amount of input tax to be claimed.
If a business uses a VAT scheme, such as the flat rate scheme, retail scheme, margin scheme, or gold special accounting scheme, then different digital record-keeping requirements should apply to those outlined above.
How should my business store digital records?
Digital records can be held in many different ways. For example, the software you use to submit your business’ VAT return can be used to keep digital records. Spreadsheets can also be used to keep digital records.
These digital records are used to make up the VAT return that a business files with HMRC. Under Making Tax Digital for VAT, returns should be submitted to HMRC using Making Tax Digital compatible software.
It’s worth noting that a business can keep digital records in more than one piece of software, but in such instances, a “digital link” will be required.
HMRC defines a digital link as “a transfer or exchange of data between the products you use to keep your records. You can create digital links by doing things like:
- linking cells in spreadsheets
- emailing records to your agent
- putting records on a portable device to give to your agent
- importing and exporting XML and CSV files
- downloading and uploading files”
Digital links should be in place for most businesses by 31 March 2020.
Act now to ensure compliance
The transition to digital records will likely be more onerous on businesses that have placed heavy reliance on manual record-keeping in the past. However, every business should be taking steps to ensure they are compliant with the new record-keeping requirements, especially now that Making Tax Digital for VAT is in effect for most VAT-registered businesses.
Although digital links do not need to be in place for most businesses until the end of March 2020, it’s best to stay ahead of the curve rather than risk missing the deadline.
For more information on how your business can comply with the new record-keeping requirements under Making Tax Digital for VAT, speak to a member of the team at MindSpace Outsourcing to find out how we can help.
